HumanGood CEO John Cochrane believes providers need to determine what part of the middle-market cohort they intend to serve, rather than referring to a single “middle-market opportunity.”
HumanGood has plenty of experience operating higher-end continuing care retirement communities, as well as lower income, government-subsidized senior housing. The Pleasanton, California-based provider, which ranked eighth on the 2019 LeadingAge Ziegler 200 list of largest nonprofit senior housing operators, owns and operates a total portfolio of 77 affordable and low-income communities, serving over 10,000 residents across the western United States.
Earlier this year, the company announced an affiliation with Presby’s Inspired Life, which serves 3,000 people across the greater Philadelphia area in 36 affordable housing communities and three life plan campuses. This gives HumanGood an East Coast presence and an opportunity to build scale nationwide.
Cochrane shared HumanGood’s goals and strategies during a recent interview for the Senior Housing News podcast Transform, which focuses on the people and ideas shaping the future of senior living.
Addressing the imbalance in supply and demand for middle-market senior housing has taken on an added resonance of late, with a new study showing the senior population in this income bracket doubling to 14.4 million in the next decade, and 54% of those will not be able to afford senior housing. As industry experts look for a mix of old and new ideas to address the divide, HumanGood knows which part of the middle-market cohort it wants to serve, while not losing focus on keeping the current generation of senior housing consumer satisfied and engaged.
On why middle-market is not a ‘one-size-fits-all’ question:
We talk about middle market as if it’s this monolithic, aligned market that shares common interests and capabilities. I think we’re misrepresenting, a little bit, the opportunity. A better way to think about middle market is to make it plural: the middle markets. There are any number of submarkets within that broad swath of the population that is either not at all or well-served by current offerings. I think that’s where the opportunities lie.
When you talk to providers about how they’re planning to enter what we refer to as the “middle market,” what most people mean is they’re coming at the market from the top down. They’re looking at traditional life plan communities and high-end rental communities, and make it more accessible to a broader demographic of people. But that’s still only reaching a small slice of a very huge market.
On HumanGood’s place in meeting middle-market demand:
Potentially, we could play anywhere in the middle market. The challenge that we and others have is you can’t play everywhere, so you’ve got to decide what is your sweet spot not only from a development standpoint, but for us from a mission fulfillment standpoint.
As we look at the middle markets and where others are targeting and what the needs and growth are, and where we best fit in, we’re seeing a lot of activity on the higher ends of the middle markets. What we’re looking to do is something different. We are experts at developing lower income, affordable housing. We know how to build on time, on budget, attractive and well-located properties. We know how to operate them exceptionally, maintain them well and provide services on a shoestring budget.
In the government-subsidized portion of our portfolio, I don’t know another organization that is doing more good for more people on a skinnier budget [than HumanGood]. We think the least-served slice of that [middle market] will be the lower third. We’re looking at taking our development and operating expertise and adapt it to a lower income middle market product that will be rental-oriented, probably mixed-use, probably a more urban location, intergenerational in terms of who we need to attract as a residential base.
We’re coming at the market from the bottom up, as opposed to the top down. And that makes it more unique and, frankly, a bit more challenging with the economics. But we have a bit of history with that, good capital partnerships that we think we can explore and exploit to tap into this market.
On how the senior housing consumer will change in the next decade:
I think we tend, as a field, to be overly optimistic about the financial prospects of the boomers, in particular. All of the indicators point to an aging population that is significantly less financially prepared for this stage in life than previous generations.
This is a generation that is going to be financially squeezed and there are a couple things we need to do to service this generation. We need to ensure that we don’t overbuild the model for a demographic that can’t afford what we currently think of as a traditional, all-inclusive life plan community.
The cable companies have discovered that consumers want to pay for what they use. We’re going to find out that our consumers want the same. We’re going to have to unbundle while designing communities so that they are attractive and affordable to the market we’re targeting.
The financial limitations of [the boomers] will also affect how we program communities, and how we program staffing. This is a generation that is going to be working well past what is a traditional retirement age. Some of the best providers are going to find ways to engage this workforce and their residents to do some of the work in the community.
There will be a financial benefit from that which will be important to this demographic. And there will be a tremendous social advantage to this that is not yet quantified, and that is a continuing need to be useful and have a role to play. This is not a generation that will be written off and marginalized. If we do our programming right, we have an opportunity to both put together a package that is affordable on a sustained [economic] basis, as well as a social engagement basis.
On whether HumanGood is interested in future affiliations:
We are open to [future affiliations]. The reason we’ve signaled that we have national ambitions is that we believe there is a consolidation that needs to happen in the not-for-profit side of our field. It is a fractured, fragmented industry whose resources are too thinly scattered to be most effective at mission fulfillment.
We as an organization, and others in the field, have been talking about national not-for-profit consolidation. We’re beginning to see it happen. We’ve had a huge role in that. The Presby’s affiliation made that more clear.
We’re looking at a few things with growth through affiliation. One is infill growth — adding either single sites or smaller groups adjacent to existing geographies. Second, we’ll look to grow from Presby’s by seeking out like-minded, well-positioned organizations in strong geographies and markets with good reputations, operating histories and management teams. We’ll look to grow on the East Coast, using Presby’s as our base of operations.
We’re looking to do the same thing in the Midwest. We don’t have anyone identified in the Midwest yet.
On his daily priorities:
This is probably not a surprise to anyone in the industry, our top priority is to continue operating what we have effectively and efficiently, and that we respond to our current market.
One of the dangers we have as a company and as an industry is that we spend a lot of time talking about what is coming next. That’s important, but we’ve got to remember that we have 13,000 current residents and we need to make sure we’re meeting their needs today and meeting their needs tomorrow, as we’re planning to bring on the next generation.
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